Applying for a business loan is a completely different process to that of a home loan application. To ensure you don’t lose your way, we’ve set out a clear path for you to follow.
1. Find a specialized broker
Commercial lending is very different to residential, so when searching for a broker, it is important to seek one who is not only accredited, but also experienced in commercial and business finance.
The first things you should ask a broker is what experience they have with commercial and business loans.
2. Gather your paperwork
Unlike residential loans, where much of the paperwork is straightforward, business loans are assessed on a case-by-case basis, which means the documentation that needs to be provided varies depending on the situation.
“Every deal is taken on its own merit, so consumers need to be prepared that lenders will ask for extra information outside of what would normally be expected,”
Other advisable forms of paperwork include tax records, company financials, business plans and of course, your business profile, so that lenders know what kind of business they are lending to.
3. Do a self check
Loan to value ratios (LVR) on business loans are lower than those in residential. In comparison to the potential 95 per cent you could obtain with LMI on a home loan, you may only get between 50 to 70 per cent for its business counterpart, which means having extra money or equity to put into the deal deems you an ideal applicant.
Having a good income and asset position is crucial as commercial loan terms are usually a lot less, which would make the monthly repayments a lot higher.
4. Further tips
Work with your broker to negotiate terms and product features that best suit your situation. This will help avoid extra onerous tasks that are sometimes expected with commercial lending.